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Tether Discussion featuring Bennett Tomlin and George Noble (grant-williams.com)
119 points by jbp 3 months ago | hide | past | favorite | 118 comments

Sometimes I wonder if this is how Michael Burry and others felt before the housing crash.

Right before the housing crash, most the in-industry folks were fully aware it was unsustainable, but they felt it would continue long term. Same goes for tether, majority of those involved in crypto know what they are doing, and the pump-up effect it's had to crypto.

> Same goes for tether, majority of those involved in crypto know what they are doing, and the pump-up effect it's had to crypto.

Not at all.

While those at the executive level have some awareness, the rank and file that I interact with at crypto companies barely understand the tech, and have no knowledge at all of the environment. It's flabbergasting.

Can you give examples of their lack of knowledge?

It feels a little sneer-clubby to complain about people in this way online, but FFS, they really are obliged to understand their profession.

* Anything about Tether, other than "it's the largest stablecoin."

* That the primary users of their product in China are engaged in capital flight, rather than entrepreneurial speculation.

* That the people yelling 'To the moon' on Twitter and Discord are excited about making easy money, not about developing projects on their platform. And that the swag and meme competitions they were running were doing little to nothing to advance them with the audience their product actually needed to court.

These are developers? I’m a bit shocked, but this confirms my gut feeling that crypto is a huge bubble driven by Tether. It only takes government regulation to burst it, which imo is inevitable.

Arguably worse, but slightly less shocking? People who are developing corporate strategy for their companies - ie: everything other than the code, but including some doing product development and (omgwtf) market research (!!)

Michael Burry recently took out a massive short position on BTC and is likely very deeply in the red at this point. Just like he is with Tesla. People who call once-in-a-lifetime events don't do it more than once, it's in the name.

There are a few issues at play here:

1. A lot of newly 'minted' Tether's are being used to buy Bitcoin (so prop it up, the Bitcoin price rises).

2. Possibly as a next step, these now more valuable bitcoins are than sold for real money, and the owners of bitfinex/tether pocket this real earned money as profit.

3. It should be noted that although the total amount of tether is still rising, the total amount of all "stable coins" is rising a lot faster, so basically, outpacing the growth of tether: the market seems to be on to them, and puts more trust in other stable coins. Personally, I like Maker's DAO decentralised SAI stable coin a lot. But preferences vary.

4. Why is there any demand at all for any stable coin? Can't a person just send/receive real dollars/euros? Answer: No .

There are a lot of unbanked people in the world, more than we in our western minds would dare to guess, I think.

Look at El Salvador: in 6 weeks since officially adopting Bitcoin as a currency (next to the US dollar, not replacing it mind you) the number of people that now have "wallet" software running on their phone is already lager then the number of people who over the past 20 years were able to open a bank account.

> Look at El Salvador: in 6 weeks since officially adopting Bitcoin as a currency (next to the US dollar, not replacing it mind you) the number of people that now have "wallet" software running on their phone is already lager then the number of people who over the past 20 years were able to open a bank account.

A few things.

First off, a "wallet" is really a bank account, albeit one at a shadow bank (i.e., unregulated bank). In the case of the Chivo wallet, I think I read somewhere that it's actually storing the USD not as USD but as Tethers. I don't have independent verification of that off-hand, though.

Secondly, the numbers of users are being quoted by Bukele, without independent verification. I have some skepticism of the veracity. Although I will note that the Google Play Store indicates "1,000,000+" downloads. Opening a Chivo wallet came with a $30 giveaway, which gives a motivation to open one up just to claim a pretty sizeable prize--and also a motivation for scammers to do it for you, hoping you won't notice.

Thirdly, there's evidence that it's being little used. More recently, they "negotiated" with the largest gas stations to give a 20¢/gal discount--suggesting that use without promotional offerings is poor. And 93% of businesses report not having anyone attempt to use it.

Overall, this suggests that the adoption of Bitcoin hasn't been a wildly positive success.

Exactly. When Visa and Mastercard started millions started using it and almost 93% of businesses started accepting cards in the first months.

Nobody uses Bitcoin, only 1 small country

I’m doubtful that credit cards were as quickly successful as you imply. It takes time for consumer behavior to change. I couldn’t find a good link, but I vaguely remember a story about how BankAmerica had trouble at first after the Fresno drop?

The people claiming instant success in El Salvador are getting fooled by misleading numbers, but it’s at least plausible that this heavy promotion will eventually pay off there.

I get this and think this is most likely scenario as well but at the same time this is equivalent to just getting your app started on the box and loading data or something correctly. It’s a step and you’re happy. These bitcoin guys just got their app to start up with limited functionality. They are happy.

Regarding point 4, it has nothing to do with unbanked people. The demand for stable coins comes from exchanges that don't want to deal wih US financial regulations.

Exactly. If I want to borrow your comic books and lend them out to my friends for a fee, I can pay you a cut on the money I make lending them to my friends. I can't do the same thing with money because then I am a financial institution. So instead I use stable coin crypto because that isn't money.

> There are a lot of unbanked people in the world, more than we in our western minds would dare to guess, I think.

I'll bet you haven't travelled in the developing world either.

I have.

I met tons of unbanked people, nearly all because they don't have any money. And the ones that do aren't going to invest it in "some app on their phone".

> the number of people that now have "wallet" software running on their phone

And what is the median balance on those wallets?

Having the software is nice, but can they actually use it to do any banking?

> SAI stable coin a lot.

I think it's DAI now.

I know some seriously sophisticated folks who are not only trading USDT at par, but even long, which I have long found puzzling given that anyone who didn’t just fall off the turnip truck knows it’s not even remotely capitalized to par.

My personal suspicion is that when a trivially distressed asset is valued at or above par by smart people that those people expect a bailout/recapitalization.

(Sidebar: USD is special among “fiat” currencies at the moment because its backed by the world’s largest military. Having guys with guns show up if you refuse to treat something as valuable is a pretty compelling argument to treat that thing as valuable.)

The US government hasn't used their military to force anyone to transact in dollars, or even threatened to do so. The dollar has value primarily because taxes inside the US are denominated in dollars. If you don't pay your taxes with dollars then eventually civilian law enforcement will show up and seize your assets.

> The US government hasn't used their military to force anyone to transact in dollars, or even threatened to do so.

There were rumors that Iraq under Saddam Hussein was looking to start pricing their oil exports in something other than dollars...

Oil is trading against Yuan for a number of years now:

> Traders appear to embrace yuan oil futures contracts, pricing them similarly to the Brent and WTI benchmarks, says analyst

> According to Bloomberg Intelligence, the volume of crude oil contracts traded on the Shanghai International Energy Exchange (INE) accounted for 10.5 per cent of the global volume at the start of June compared to 6.2 per cent in the second quarter of 2018.


EU also wants to start trading oil in Euros:


And with the Euro being explicitly set up by other countries with the intention of challenging the USD as a global reserve currency without the US so much as wagging a finger at them, it's a little hard to believe that the "real" reason a US administration dominated by neoconservative hawks resumed a decade-old conflict with an outspoken enemy in a strategically important region full of oil at a time the country was obsessed with fighting sponsors of terrorism was the relatively insignificant decision to accept Euros for some types of international payment...

The best you could say about that theory is that it's confusing cause and effect. Other nations which have been hostile to and sanctioned by the US for some time also shifted from dollars to Euros.

Ah absolutely, the much more tangible short-term example of “guys with guns” is (admittedly ever more militarized) domestic law enforcement.

But the implied threat towards anyone who say, started dumping US sovereign debt, or transacting petroleum in EUR, or whatever is very real. Countries have been liberated for less.

China dumped a bunch of US sovereign debt. They haven't been "liberated" yet.


Russia has started transacting petroleum in EUR. They haven't been "liberated" yet.


Petroleum transaction only make up a small fraction of worldwide dollar use. It doesn't really matter.


Thank you for the links. I was unaware that the PRC’s Treasury holdings had been pared back so much.

I do think it’s interesting to note that both of the examples you used are the only two countries that the US military wouldn’t like to try its hand against. And there is a broader point there: my original point becomes less relevant the further that global US hegemony slips.

Exactly. And this is not due to the fact that they are the global powers of enough strength to be a big opponent. /S

I admit it is mighty convenient for the US to have the dollar as the reserve currency, but really, you are stretching your point, people outside US not accepting US dollars don't have violent threats looming over them.

When enough players believe that US would use their military power in case necessary, it won’t be necessary to use it.

> The dollar has value primarily because taxes inside the US are denominated in dollars.

The amount of USD reserves outside US is huge. Entities that hold these reserves have no interest in paying taxes to US government.

Besides the Iraq thing someone mentioned, Gaddafi in Libya got taken out right after he spoke about wanting to sell oil in euros.

But most importantly, there's Saudi Arabia. Saudi Arabia has no military except the US military, and Saudi Arabia prices oil in dollars. It isn't conceivable that they could price oil in another currency and still receive protection from the US (i.e., continue to exist).

The US kind of "has" to continue this arrangement because if the world stops trading oil in dollars, the demand for dollars plummets and the dollar crashes because there are just too many dollars out there. The Fed can't "suck in" all that excess money without causing a severe recession/depression.

The US gains some minor benefits by providing the reserve currency used for most international oil trades. However that's only a small fraction of worldwide dollar use. Even if everyone switched to trading oil in euros tomorrow that wouldn't cause a dollar crash.


This article is interesting and helpful. So, thanks.

That said, I'm not 100% convinced. If we stop trading oil in dollars, doesn't that reduce the need for countries to keep dollars in reserve? It could be the beginning of a slippery slope.

The amount of dollars kept in reserve to trade oil with certain petroleum exporters is a tiny proportion of total dollars in circulation

What is useful is having quadrillions of dollars of other payment obligations denominated in dollars, from the IRS to mortgage debt to IMF loans to international financial markets to people paying cash rent in Ecuador, and a central bank that can raise interest rates if it believes the demand for dollars is falling.

Sterling is still valuable, despite the fact it stopped being the main global reserve currency decades ago and the UK doesn't have any real ability to invade people to change that.

> Besides the Iraq thing someone mentioned, Gaddafi in Libya got taken out right after he spoke about wanting to sell oil in euros.

Source? Specifically, a source that can pinpoint a statement by a Libyan official in the immediate run-up to the intervention in Libya (i.e., late 2010 or early 2011) indicating a desire to switch to selling oil in euros.

The closest I've ever seen to such a source is that one of the cables released in the Wikileaks leak reported that a source close to Sarkozy outlined a few reasons why he wanted to intervene of Libya, one of which was a desire to replace the CFA franc (effectively backed by France) with a gold-based Libyan dinar.

That's all I needed to see.

And apparently it was enough for the Secretary of State's people to see, too.

I... am stunned why people think this in any way supports the narrative of petrodollar-supremacy. Because neither oil nor dollars are implicated in that string of statements at all. Especially GP's summary of the statement--"we bombed Libya because they wanted to price oil in euros instead"--is at complete odds with the implied statement here--"Libya wanted to move from euro-backed currency."

Now it's important to note the context of the source. The diplomatic cables are--effectively--gossip reports. In general, they're not indications that anyone actually believes them, nor indications that their reports are causes for action. A report that a French president is concerned about threats to French suzerainty in its former African colonies is exactly the sort of thing that I'd go "right, I believe that... and I don't care." There is yet, to my knowledge, any evidence that this actually influenced US foreign policy in any manner whatsoever, let alone supports the petrodollar-supremacy narrative.

If not supremacy of dollar, what reason do you hold dear for the toppling of yet another sovereign government in this case?

> If not supremacy of dollar, what reason do you hold dear for the toppling of yet another sovereign government in this case?

Why the US and the West targeted an anti-Western, terrorism exporting dictatorial regime with a history of trying to acquire WMD whose overt ideology was a blend of totalitarian socialism and a unique version/descendant of Islam during a period where it was unusually active in targeting anti-Western, Islamic regimes especially those with a history of trying to acquire WMDs under the aegis of a war on terror?

Dunno. Must be rumors that they planning to move away from the CFA Franc somehow raising worries that they’d stop selling oil for dollars.

I think dragontamer has a compelling answer that is better put than I could have, but I would add one thing. Russia and China could have vetoed the UN resolution that effectively signed the Qaddafi regime's death warrant. But they didn't. Even if you don't care to understand anything about Middle Eastern or North African politics, that alone should suggest that there exists other reasons than naked Western imperialism for the toppling of the Qaddafi regime.

I haven't taken the time to look for a source. Maybe it really is just a rumor.

Saudi Arabia has the fifth largest military budget in the world. They spend more than Germany, France or the UK. Their training and readiness probably isn't nearly as good, but to say they have no military is ... odd.

More to the point, many nations sell oil for non-USD. It's quite common. Further, the oil trade is a small fraction of international USD movement. The idea that the "petrodollar" is a major factor in international politics is... unlikely to be true.

Wikipedia says the Saudis have the 9th largest defense budget in the world. They also have a decent sized army, navy and air force. TIL.

I was under the impression that the Saudis literally didn't have a military, because the ruling family was afraid of coups.

Saudi Arabia has a large military to deal with external threats. And they also have a large and separate National Guard to protect the royal family from coups and terrorists.

They have exactly as much military as they purchase from US and Israeli contractors/loan from militaries.

> many nations sell oil for non-USD

Name the largest, why obfuscate?

> Saudi Arabia has no military except the US military

This laughably wrong.

The conversation has moved on (meaning, you're right, and it's already been pointed out and discussed by others).

You should read the other comments before you add your own.

For what it’s worth, this is from July. It predates the recent CFTC news.

Why does the CFTC news have any bearing? The settlement was for a period of time that predates the much larger parabolic issuance of the past 18 months.

I downloaded the mp3 to listen to this, but the audio is filled with weird squeaks, squawks, and short skips. I don't know if their microphone is broke, if this is some effects they added to be cute, or if their mp3 download is simply corrupted. Either way, it's intolerable. I couldn't listen to it for more than a minute.

The server reports that the MP3 file that you get from the download link is 79950993 bytes long, but the connection is closed for me after 79944810 bytes each time I try to download it.

Perhaps this is the reason?

The download link differs from the link that the embedded player is using for the file.

Try downloading the file that the embedded player uses instead. Here's a link to said file: https://www.grant-williams.com/podcast-player/33211/the-gran...

Interestingly the download errors after 79944810 bytes using http1.1, but 79928426 bytes using http2. Strange!

Thanks, that embed link worked properly.

That link works and sounds fine, thank you.

There must be a problem with the mp3. I'm listening online and there's no such issues.

I’m not hearing anything like that.

That's the sound of Non Fungible Tinnitus.

Something I was thinking about is that this year alone Tether received almost 50 billions of new US dollars for printing the same amount of their coin, reaching the staggering Market cap of 68B.

Even if they started as a scam and were a few billions out of parity, 2021 gave them a lot of additional runway, allowing them to recompose their reative parity to the USD.

For instance, they could be 80% backed at the start of the year, and after 2021 cash inflows so far they could have gone up to 93% backed by simply doing nothing.

They could although it's more likely, given their own pie charts, they didn't receive any US dollars for printing their coin over the past 1-2 years and instead loaned (i.e. commercial paper) USDT out. These loans are also significant in that they put Tether in the top 10 commercial paper holders in the world, but not significant enough for others in the top 10 to know about them or do any business with them.

This is awfully optimistic thinking.

They could also be <50% backed at the start of the year and <50% backed now...

No one really knows.

Personally, i dont see any difference between any coin and and "real world" currency.

I dont mean the power behind it and stuff.

But crypto basically left the gold standard itself a long time ago!

USD gets its value from the legal requirement that taxes are paid in USD. Anyone who lives or wants to do business in the United States has to have dollars. That sets a floor of demand that more demand can be built on.

Cryptos often have limited supply but have no floor on demand. For USD to go to zero, the United States as we know it would have to collapse. Most cryptos could go to zero with no real world change aside from people finding a different asset to speculate on.

> Cryptos often have limited supply

There are 6500 cryptocurrencies today. Anyone would wanted to create a new one, could in an instant.

I know! What i meant, was, that crypto was made because the gold baking was gone. (one of the reasons and anonymity etc) now, we have tether beeing printed out of thin air and no one gives a shit :)

Crypto-currencies are selling you a service: linearizing database transactions. This is like arguing that Apple could arbitrarily go to zero because the world would find a different phone to use, and while that's true it seems to miss the point that Apple is unlikely to go to zero until after someone makes a better phone or makes phones obsolete. The world of decentralized database transactions--particularly the turing complete ones you get from systems like Ethereum--isn't some random speculative asset like artwork or baseball cards.

...so why is it that the world of "decentralized database transactions" is being used near exclusively for speculative assets like the various cryotocoins and, err, NFTs containing alleged artwork?

Also, what real world usage do you actually see for "decentralized database transactions"?

Beyond massive speculation and pictures of apes?

Some people--me included--believe that centralized systems for basic things are bad because of their single points of failure, whether physical or merely administrative. If you believe that centralized databases have value, and you believe that decentralization has value, then decentralized databases sound useful.

Honestly, most centralized databases are used for silly things you would disagree with also, and the ones that aren't are often used for financial services that you are going to claim are somehow not ok when decentralized but totally fine when centralized :/.

FWIW, I've been using it as a fully distributed replacement for the Tor directory servers (which are run by 9 people as a form of charity, with no plan when I have talked to them for how to deal with people coming by with crowbars to threaten them) and then people pay for their bandwidth (allowing for both fair allocation of resources and well as incentivization of supply), which of course fundamentally requires a programmable decentralized currency (which is itself just a program running on the programmable decentralized database).

I know tons of people speculating in Ethereum. I know nobody using it as a database.

I know a ton of people who speak English and I know literally no one who speaks Swahili: that doesn't mean that no one speaks it :/.

I never said it did. I never said nobody actually uses Ethereum. I pointed out that its value is actually largely based on speculation. You may claim that there is a floor because it has inherent value as a database. You'd be right. Remove all the speculation and the floor is very very low, though.

> Crypto-currencies are selling you a service: linearizing database transactions.

That service is worth zero dollars to me and 99.9% of the world.

Also, the cryptocurrency doesn't sell this service, and doesn't make any money.

> USD gets its value from the legal requirement that taxes are paid in USD

How long will that last? Miami and El Salvador are already proving you wrong.

> For USD to go to zero, the United States as we know it would have to collapse

Not if your government and country switches to crypto before the fiat collapse.

> How long will that last? Miami and El Salvador are already proving you wrong.

No, they don't prove him wrong. You need to argue against the best possible version of your opponent's position. Otherwise it's just, as they say, words in the wind.

Everyone shall start with FED investigation and it's whole ecosystem behind it, it's much bigger fraud. They shall start with Paret rule here :D

You could just remove the T. In all seriousness the way the US gov has been playing with the debt ceiling and the enormous amount of money being printed the USD also has some serious issues.

This stuff is so disingenuous from maxis. I get that you want someone to pump your bags.

But the US Govt gets to print dollars. That’s how that works, for better or worse. Tether does not get to print dollars (which is what they are doing by claiming they are “fully backed”).

It’s an asinine take in at least three separate ways.

First 1USDT should equal the value of 1USD, so any drop in value of the USD would also be a drop in USDT purchasing power.

Second, 1USDT backed by less than 1USD in value is obviously worth less than 1USD no matter what happens to the USD.

Third, the charter of the fed, created by congress, is to maintain a low fixed rate of inflation and maximal employment (along the Philips curve). They adjust the supply to meet this objective. Tethers goal is to pump the bags of early crypto entrants to simulate - and stimulate - liquidity to the benefit of the few.

Their clever trick is this: instead of making every USDT worth less than 1USD they made some of the USDT worth 1USD and the rest worth nothing. This plus relentless misinformation and shaming of the skeptics apparently makes it possible to keep up for a very long time.

This is a very insightful way to put it. When the wheels fall off USDT will become valueless in no time at all.

> Second, 1USDT backed by less than 1USD in value is obviously worth less than 1USD no matter what happens to the USD.

That's obviously not how it works. For instance, US banks have capital requirements of ~8%, but the dollars they issue aren't worth $0.08, they're worth a full dollar (as long as no bank run happens). The same mechanics hold for Tether, whether they're regulated or not.

In fact, USDTs are often worth more than a real dollar because the demand for them trumps their risk discount.

Here is a perfect problem with crypto: people understand just enough tech or economics to be dangerous, and not enough to truly understand the system.

This is of course absolutely not how things work. The risk isn’t with the dollar holders in the banking scenario because a dollar isn’t backed - it doesn’t need to be backed. This is the essence of fiat currency.

The risk is with depositors (creditors), and as you say they do not value their deposits at 8 cents on the dollar just because that’s what capital reserve ratios are. We have tons of regulation and insurance and centuries of mistakes that have led to the current system. But your argument conflates one core thing: assets vs liabilities. The dollars that banks lend are real dollars, and the people who receive those dollars don’t care what the bank’s financial health is. That’s because the dollars they receive in a loan are liabilities, whereas when people receive Tether, it’s an asset. Let’s explore…

People don’t deposit dollars in banks, and receive a certificate of deposit and use that in lieu of dollars. This is what is happening with Tether. Tether doesn’t take USD deposits and turn around and issue USD loans, it takes USD deposits and issues USDT certificates of deposit, which the market trades at par with USD.

This difference is crucial though. Banks are fundamentally limited in the number of loans they can make versus the amount of deposits they hold. So they might be overlevered, but borrowers don’t worry about the dollars they receive being fake. And if the bank collapses, who cares, I’m a debtor, not a creditor. Reserve ratios matter to creditors, and don’t impact the legitimacy of any loans of they’ve made.

Tether on the other hand takes deposits and issues certificates of deposit that they call USDT and claim are redeemable for one USD. These then trade on the open market as fungible USD. The problem is that this makes USDT holders creditors, whereas in the bank example USD holders are debtors. So this means as a creditor the solvency of the issuing institution is of paramount importance. If Tether implodes, USDT are worthless, just like if a bank implodes, its certificates of deposit might be worthless (ignoring insurance). But in the bank scenario, the dollars that it loaned out aren’t worth any less.

On top of that, even though banks aren't required to keep more than 8% of deposits in reserve, they are subject to loads of regulation on their balance sheet to ensure that they are well capitalized. The FDIC exists to stop a run on any bank, but the regulations exist to ensure that if a bank needs to be taken into conservatorship, the assets to bank the deposits will eventually be recoverable.

>But in the bank scenario, the dollars that it loaned out aren’t worth any less.

Just a small point of clarification - I think - that helps to make your point a little clearer.

If the bank collapses - it's likely precisely because those loaned dollars ARE worth less. Commonly in bank collapses - those that borrowed from the bank can't repay for whatever reason. Creditors to the bank then get spooked and demand 'redemption' of their deposits.. etc

The difference is that whether or not a borrower from the bank still has that wealth is mostly independent of the actions of the bank (making other risky loans that lead to collapse etc). The value of the borrowed dollars depends entirely on the borrower. Whereas with tether - you might have locked it down in a hardware wallet encased in cast iron steel under your bed - doing nothing risky with it at all - but it could still go to zero in value. Tether's value depends on the actions of the issuer entirely.

Similarly - the owners of tether can't, through their risky use of tether endanger the prospects of the issuer; while borrowers can, through their risky use of loans, endanger the prospects of the banks.

> Just a small point of clarification - I think - that helps to make your point a little clearer.

> If the bank collapses - it's likely precisely because those loaned dollars ARE worth less.

I get what you mean, but it's not quite the same. The loan, as in the receivable, is worthless and thus might prompt/contribute to a bank run/collapse. But the only reason defaults are an issue (like in this scenario) is precisely because the loaned dollars do have value, and the bank (and its depositors/creditors) want them back.

It's all just assets and liabilities.

The vast majority of dollars are created by private banks, not the US government.

Not anymore, and the impact on money supply is very different.

But I understand what you mean, the issue is that central bank rates and facilities combined with reserve ratios are the primary determinants of money creation (well, and GDP growth). So the transmission mechanism winds up being private banks, but it's still at the behest of the US Government.

Isn't the official denomination of Maxis the Simoleon?

There’s a difference between backed by the entire United States and being backed by a company with $66 million in their coffers.

Ya I’m a person that really believes in crypto and the major changes it can make but, people need to remember the US dollar is a different beast. It’s got the strongest military on earth backing it, a pretty powerful IRS, and decently structured government. Sure it and it’s government has its faults but so does everything.

>There’s a difference between backed by the entire United States

Indeed. The us currently has in its coffers a $29T hole [1]

[1] https://www.usdebtclock.org/

I love the mental gymnastics here. Is the USD good or bad? If USD is bad, then best case Tether is bad, because it’s just USD. And worst case, Tether is just counterfeiting this already bad thing, which makes it doubly bad.

I find it so amazing for a group of people who despise the USD how much energy they will spend defending a company whose entire business model is USD.

In defense of Tether, maxis always try to deflect with this stuff, as if a couple of people minting ERC20 tokens is comparable in any way to the US Govt.

That’s not really how the financial system works. Debt is an investment in the economy, like you taking out a loan to buy a pizza shop. If your pizza shop generates more revenue than cost to service your debt, then the fact you have the debt doesn’t really matter does it? After all your own a pizza shop too, right. On the US side, the system fails once the economy fails - and then we have much bigger problems.

You’re looking only at the liabilities without checking what assets those liabilities are backed by, and what kind of new revenue those liabilities created. Debt isn’t burned money, it’s invested money at work in the economy. Out creating new revenue to service said debt.

Also, the value of a dollar isn’t driven by the federal balance sheet but rather demand for those dollars. When dollars enter the world, via fractional reserve borrowing, the new dollars are issued against new debt. The obligation to repay the dollar to the lender is what creates demand for dollars and gives them value.

How do you think we will handle servicing our interest payments if the fed makes good on its discussion of rate hikes next year? Genuine question.

Yes, and indeed, the USistan's long-term viability, like any human enterprise must be looked in terms of assets vs liabilities.

And right now, the picture isn't exactly rosy, certainly not something I'd invest in.

I'm no fan of Tether (as a matter of fact, I'm pretty certain it'll blow up in fairly short order. I am actually looking for a well constructed way to short it)

I was simply point out how ridiculous the comparison is.

picture isn't exactly rosy, certainly not something I'd invest in

From the pessimistic point of view that could be said about anything. But people around the world have little to no better options when it comes to the question “okay I finally have some credit, where do I put it into?”. It’s not rosy, but it is the least stinking pile of shit the world has.

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